I'm not using Internet on my gaming/emulator machine so I wouldn't know if Windows Updates is slowing down Dolphin or not.
But seeing as you use Internet I would most definitely recommend to use Windows Updates because otherwise you'll be vulnerable to threats as stated before.
To answer your question:
I'm not really sure and don't really want to find out myself.
But if I had to guess I would say NO it doesn't slow Dolphin down, because that would mean Windows 7 SP1 would slow down Dolphin too compared to Windows 7 RTM and I haven't noticed any change between them. Consider all updates after SP1 as a SP2 or something and that it doesn't slow things down.
But seeing as you use Internet I would most definitely recommend to use Windows Updates because otherwise you'll be vulnerable to threats as stated before.
To answer your question:
I'm not really sure and don't really want to find out myself.
But if I had to guess I would say NO it doesn't slow Dolphin down, because that would mean Windows 7 SP1 would slow down Dolphin too compared to Windows 7 RTM and I haven't noticed any change between them. Consider all updates after SP1 as a SP2 or something and that it doesn't slow things down.